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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 0 - no response to price change






2. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






3. The ability to set the price above the perfectly competitive level






4. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






5. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






6. The price of a good measured in units of currency






7. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






8. The mechanism for combining production resources - with existing technology - into finished goods and services






9. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






10. TR = P * Qd






11. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






12. All firms maximize profit by producing where MR = MC






13. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






14. Ei > 1






15. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






16. The sum of consumer surplus and producer surplus






17. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






18. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






19. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






20. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






21. Ed = 1






22. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






23. ATC = TC/Q = AFC + AVC






24. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






25. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






26. The difference between total revenue and total explicit costs






27. Ed > 1 - meaning consumers are price sensitive






28. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






29. The lost net benefit to society caused by a movement away from the competitive market equilibrium






30. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






31. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






32. The most desirable alternative given up as the result of a decision






33. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






34. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






35. The imbalance between limited productive resources and unlimited human wants






36. The total quantity - or total output of a good produced at each quantity of labor employed






37. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






38. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






39. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






40. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






41. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






42. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






43. The practice of selling essentially the same good to different groups of consumers at different prices






44. Occurs when LRAC is constant over a variety of plant sizes






45. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






47. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






48. Entry (or exit) of firms does not shift the cost curves of firms in the industry






49. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






50. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur